Stock-Based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

On an annual basis since 2015, the Company has implemented a long-term incentive plan ("LTIP") which grants awards to employees and officers selected by the Compensation Committee of the Board of Directors (the “Compensation Committee”). PSU awards are earned based on achievement against one or more performance metrics established by the Compensation Committee in respect of a specified performance period. Earned PSUs range from zero to a specified maximum percentage of a participant’s target award based on the performance of applicable performance metrics, and are subject to vesting terms based on continued employment.

The first performance period ran from January 1, 2015 through December 31, 2017, with PSUs earned based on achievement of EBITDA metrics established by the Compensation Committee and total shareholder return relative to a peer group. Once earned and vested, PSUs were settled in one share of Company common stock per vested PSU (or, at the Company’s election, cash equal to the fair market value thereof). There is no exercise price. The first vesting period ran through March 31, 2018 (the “2015 Plan”). All PSUs are granted under, and are subject to the terms and conditions of, the Company’s 2014 Omnibus Incentive Compensation Plan, and do not increase the number of shares previously reserved for issuance under that plan. On August 2, 2016 the Compensation Committee established a consecutive LTIP (the “2016 Plan”) having consistent terms as compared to the 2015 Plan. On March 31, 2019 the vesting period ended for the “2016 Plan” and earned and vested PSUs settled in one common share of the Company per vested PSU - issued to participants on April 30, 2019, except for certain PSUs settled in cash at fair market value to cover wage taxes or as substitute for share transfer restrictions. On July 31, 2017 the Compensation Committee established another consecutive LTIP (the "2017 Plan") having consistent terms as compared to the 2015 and 2016 Plan. On July 12, 2018 the Compensation Committee established a consecutive LTIP (the "2018 Plan") and on July 16, 2019 the Compensation Committee established a consecutive LTIP (the “2019 Plan”). The achievement metrics have changed for the 2019 Plan from EBITDA performance to a 'return on capital employed' and a 'total shareholder return' target. All PSUs are granted under, and are subject to the terms and conditions of, the Company’s 2014 Omnibus Incentive Compensation Plan (the “Omnibus Plan”).

In its “2019 Plan” the company issued beside PSUs ("2019 Plan PSU") also a tranche of restricted share units (“RSUs”) for its selected employees and officers ("2019 Plan RSU"). RSUs vest by one-third on each of the first, second and third anniversary of the grant date. The RSUs are subject to certain further restrictions after vesting. Settlement of selected employees and officer RSUs is within 75 days following the third anniversary of the grant date.

Specific Members of our Executive Committee received RSUs upon signing. These sign-on RSUs are split into three parts each with service periods of one year and therefore vest on year one, two or three after the grant date.

In April 2018 the Compensation Committee established a stock compensation plan for the Board of Directors under the existing Omnibus Incentive Compensation Plan.

The following table provides detail as to expenses recorded within operating income with respect to stock based compensation:


	Years Ended December 31,
			2019			2018			2017
			(In thousands)
2015 Plan	$	—		$	777		$	2,736
2016 Plan	1,083			4,566			4,053
2017 Plan	3,016			5,052			2,046
Stock compensation plan for Board of Directors	561			563			—
2018 Plan	3,435			2,961			—
Sign on RSU incentive	453			—			—
2019 Plan	891			—			—
Total expenses	$	9,438		$	13,919		$	8,835

In the following table summarizes the activity of our PSUs within year ended December 31, 2019:


Period granted	Performance period	PSUs outstanding at January 1,	PSUs granted	Performance based adjustment	PSUs settled	PSUs forfeited	PSUs outstanding at December 31,	PSUs expected to vest	Weighted average grant date fair value
2016	2016 - 2019	677,607	—	299,499	(977,106)	—	—	—	$	17.21
2017	2017 - 2020	467,349	—	—	—	(49,097)	418,252	401,904	$	24.89
2018	2018 - 2021	450,034	—	—	—	(94,268)	355,766	299,418	$	39.24
2019	2019 - 2022	—	332,891	—	—	(103,164)	229,727	215,933	$	11.48
	Total 2019	1,594,990	332,891	299,499	(977,106)	(246,529)	1,003,745	917,255
	Total 2018	1,610,894	450,977	110,215	(557,337)	(19,759)	1,594,990	1,556,011
	Total 2017	1,145,238	474,660	—	—	(9,004)	1,610,894	1,433,440

In the following table summarizes the activity of our RSUs within year ended December 31, 2019:


Period granted	Vesting period	RSUs outstanding January 1,	RSUs granted	Performance based adjustment	RSUs settled	RSUs forfeited	RSUs outstanding at December 31,	RSUs expected to vest	Weighted average grant date fair value
Sign-on RSUs:
2018	2018 - 2021	35,817	—	—	(11,939)	—	23,878	23,878	$	25.81
2019	2019 - 2022	—	45,257	—	—	—	45,257	45,257	$	15.89
2019 Plan:
2019	2019 - 2022	—	173,940	—	—	(45,493)	128,447	128,447	$	14.74
	Total 2019	35,817	219,197	—	(11,939)	(45,493)	197,582	197,582
	Total 2018	—	35,817	—	—	—	35,817	35,817
	Total 2017	—	—	—	—	—	—	—

Certain members of our Board of Directors receive compensation in form of restricted shares (“RSs”) in accordance with the 2014 Non-employee Director Plan. Under this plan 24,080 RSs are currently outstanding. The RSs will vest and become non-forfeitable on April 30, 2020, the first anniversary of the grant date.

At December 31, 2019, we had unrecognized compensation cost of $9.5 million, based on the target amounts, related to unvested PSUs, RSUs and RSs, which is expected to be recognized over a weighted average period of 1.6 years.

The closing price of the Company's shares and therefore the intrinsic value of one PSU or RSU outstanding was $19.30 as of December 31, 2019, $25.28 as of December 31, 2018 and $25.60 as of December 31, 2017. Total intrinsic value of PSUs and RSUs amounted to $23.2 million as of December 31, 2019, $41.2 million as of December 31, 2018 and $41.2 million as of December 31, 2017.

The following table lists the inputs to the valuation model used for calculating the grant date fair values under the 2019, 2018 and 2017 Plans:


	2017 Plan	2018 Plan	2019 Plan PSU
Expected term (in years)	3	3	3
Dividend yield (%)	1.88%	1.94%	4.65%
Expected volatility OEC (%)	33.77%	30.22%	33.30%
Expected volatility peer group (%)	17.30%	20.09%	17.62%
Correlation	0.4574	0.3659	0.5205
Risk-free interest rate (%)	1.45%	1.46%	1.83%
Model used	Monte Carlo	Monte Carlo	Monte Carlo
Weighted average fair value of PSUs granted	$24.89	$39.24	$11.48

In April 2019, 977,106 PSUs (including performance adjustment of 299,499 PSUs) were exercised for the 2016 Plan. In April 2018, 557,337 PSUs (including performance adjustment of 110,215 PSUs) were exercised for the 2015 Plan. The expected term of share awards represents the weighted average period the share awards are expected to remain outstanding. The remaining contractual terms of share units outstanding is April 2020 for the 2017 Plan, April 2021 for the 2018 Plan and April 2022 for the 2019 Plan.

The Company used a combination of historical and implied volatility of its traded shares, or blended volatility, in deriving the expected volatility assumption. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of stock options. The dividend yield assumption is based on the Company's history.

Stock-based compensation expense is compromised of the following line items:


	Years Ended December 31,
			2019			2018			2017
			(In thousands)
Cost of sales	$	139		$	55		$	73
Selling expenses	1,412			2,711			1,637
General and administrative expenses	7,364			10,394			6,658
Research and development costs	523			759			467
Stock-based compensation expense	$	9,438		$	13,919		$	8,835

The assumption for estimating expected forfeitures is based on previous experience and based on 3% leavers rate per year. Actual forfeitures are in addition recorded as they occur.